Do 3.0-4.0% Hard Money Loan Actually Exist?

Sorry to ruin the suspense but 3.00% to 4.00% rates on hard money loans don’t exist. Yet, that doesn’t keep prospective borrowers and other mortgage brokers from requesting hard money loans priced at these interest rates every month.

I completely understand the “If you don’t ask for it, you won’t get it” concept. As a customer of any product or service, you should ask for the best pricing or a discount or even an added bonus offer like infomercials give us in the, “Oh but wait, there’s more!” offer.

But asking for 3.00% to 4.00% financing at 75% LTV on a fix and flip property doesn’t work because those terms just don’t exist in the present hard money loan marketplace. If they did, this blog section, along with this entire website, would be dedicated to marketing our 3.00% to 4.00% hard money loan programs. I’d be writing all day long about how a real estate investor could get bank loan pricing in less than a week without having to provide any personal financial or background information to the lender who would simply do a five-minute site visit rather than ordering a full appraisal before funding the loan.

Hard money lenders are usually pretty conservative with the loans they issue because it’s either their own personal or family money or they’re managing a small group of investor’s money to make real estate loans with a target yield of 9.00 to 12.00%. There just aren’t any hard money lenders or funds out there offering 3.00% to 4.00% rates. That’s bank territory which comes with an extensive list of conditions and requirements that borrowers need to meet in order to be granted a loan. It usually takes about 30-45 days to satisfy all the requirements of the bank in order to get loan docs.

And in the fix and flip real estate business, 30-45 day escrow periods don’t work. Fixer upper properties have short escrow periods of 5-14 days as cash buyers and hard money financed buyers write offers to close quickly in order to acquire the property over the competition. For the hard money financed buyer, they’re usually coming in with a loan for 75-85% Loan-To-Value (LTV) of the purchase price with an interest rate ranging from 9.00% to 12.00%. That’s where the market is and that’s what experienced house flippers come to expect from their fix and flip financing lenders.

I truly wish 3.00% to 4.00% hard money existed. It would be great for borrowers and it would be the easiest thing to sell in the business. But the reality is that it doesn’t exist and probably never will exist. But that won’t stop people from asking if we have a loan program priced that low because you know, “If you don’t ask for it, you won’t get it.” What’s there to lose?